Diffusing Innovations Under Market Competition: Evidence from Drug-Eluting Stents

Ginger Zhe Jin, Hsienming Lien and Xuezhen Tao

No 34374, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper examines how hospital competition and insurance reimbursement policies shape the diffusion of medical innovations. Using patient-level data from Taiwan’s drug-eluting stent (DES) market in the Taipei area, we estimate a structural model that integrates patient demand with hospitals’ endogenous portfolio and pricing decisions. We document a fundamental trade-off: intensified competition reduces prices but weakens hospitals’ incentives to adopt new technologies. Counterfactual simulations that vary market structure and incorporate selective contracting or targeted patient coupons show that the effectiveness of reimbursement policies depends critically on hospitals’ strategic responses and the surrounding competitive environment.

JEL-codes: D4 I18 L13 O33 (search for similar items in EconPapers)
Date: 2025-10
New Economics Papers: this item is included in nep-com, nep-eur and nep-hea
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